ICF Reports Second Quarter 2017 Results

Total Revenue Increased Slightly Over Last Year, led by a 6.1
Percent Increase in Commercial Revenue; Service Revenue1
Increased 1.2 Percent

Diluted EPS was $0.63, up 14.5 Percent Over Last Year; Non-GAAP EPS1
was $0.73, up 5.8 Percent

Contract Awards Were $340 Million; TTM Contract Awards Were $1.47
Billion for a Book-to-Bill of 1.22x

Operating Cash Flow for the First Half Was $17.2 Million, up 9.6
Percent Over Last Year

August 02, 2017 04:05 PM Eastern Daylight Time

FAIRFAX, Va.--(EON: Enhanced Online News)--ICF (NASDAQ:ICFI), a consulting and technology services provider to
government and commercial clients around the world, reported results for
the second quarter ended June 30, 2017.

Second Quarter and First Half 2017 Results

“ICF’s results continued to benefit from our diversified business model,
serving government and commercial clients both domestically and
internationally. In the second quarter, our work for commercial clients
increased 6 percent over prior-year levels, representing our fourth
consecutive quarter of strong year-on-year growth. This momentum, along
with positive state and local and international government revenue
comparisons, offset lower revenue from federal government clients which
was mainly due to reduced materials and subcontracting activity,” said Sudhakar
Kesavan, ICF’s Chairman and Chief Executive Officer.

“Higher utilization and the increased contribution of higher margin
revenue drove significant EBITDA margin¹ expansion and led to
double-digit growth in diluted earnings for the quarter. The EBITDA¹
results include the impact of $0.6 million in special charges that were
incurred in connection with ongoing efforts to actively manage our cost
structure.

“Positive trends in contract awards and a robust business development
pipeline have set the stage for ICF’s continued growth. Contract wins
for the first half of 2017 were $590 million, which included a notable
addition to ICF Olson’s loyalty program client roster; and our business
development pipeline continues to be healthy at $4.6 billion as of the
end of the quarter,” Mr. Kesavan noted.

Second quarter 2017 total revenue was $306.4 million, a 0.3 percent
increase from $305.4 million for the second quarter of 2016. Service
revenue was up 1.2 percent at $224.9 million, compared to $222.4 million
reported last year. Net income was $11.9 million in the second quarter
of 2017, up 12.8 percent from the $10.6 million reported last year.
Diluted earnings per share increased 14.5 percent to $0.63 from $0.55
reported last year. Non-GAAP EPS increased 5.8 percent to $0.73 per
share compared to $0.69 in the prior year. EBITDA for the second quarter
of 2017 was $29.3 million, up 10 percent from $26.6 million reported
last year, and the second quarter EBITDA margin expanded 80 basis points
year-on-year to 9.5 percent of total revenue. Adjusted EBITDA margin¹
for the second quarter was 9.7 percent of total revenue and 13.3 percent
of service revenue, which represents year-on-year increases of 70 basis
points and 80 basis points, respectively. Operating cash flow for the
first half of 2017 was up 9.6 percent over last year.

Backlog and New Business Awards

Total backlog was $2.0 billion at the end of the second quarter of 2017.
Funded backlog was $927 million, or approximately 46 percent of the
total backlog. The total value of contracts awarded in the 2017 second
quarter was $340 million, up 12 percent year-on-year, bringing the
trailing twelve month book-to-bill ratio to 1.22.

Government Business Second Quarter 2017 Highlights

U.S. federal government revenue was $141.3 million, a 4.8 percent
decline resulting primarily from lower materials and subcontracting
revenue. Federal government revenue accounted for 46 percent of total
revenue compared to 49 percent of total revenue in the second quarter
of 2016.

U.S. state and local government revenue increased 4.7 percent
year-on-year to $35.9 million and accounted for 12 percent of total
revenue, compared to 11 percent of total revenue in the 2016 second
quarter.

International government revenue increased 0.9 percent year-on-year,
and accounted for 7 percent of total revenue, compared to 6 percent of
total revenue in the 2016 second quarter.

Key Government Contracts Awarded in the Second Quarter

ICF was awarded more than 90 U.S. federal government contracts and task
orders and more than 200 additional contracts from state and local and
international governments. The largest awards included:

Policy and Program Support: A recompete contract with a value
of up to $20.8 million with the Federal Emergency Management Agency to
provide policy support, exercise planning, training development,
program management and administrative support.

Program Support: A funding increase of $5.7 million from the
Pennsylvania Department of Insurance to provide program support
services for the Underground Storage Tanks Indemnification Fund.

Disaster Recovery: Two task order extensions with a combined
value of $4.3 million with the New Jersey Department of Community
Affairs to continue to implement Hurricane Sandy housing recovery
programs.

Program Implementation: A recompete contract with a value of up
to $3.7 million with the Administration for Children and Families of
the Department of Health and Human Services (HHS) for a regional
customer services improvement project.

Other government contract wins with a value of at least $2 million
included: physical security system customization services for the HHS
Centers for Medicare and Medicaid Service; content management and
communications support for the Corporation for National and Community
Service; continued support for digital strategy for the HHS Office of
the Secretary; and extension of services in support of enterprise
strategy and management for the Bureau of Consular Affairs of the U.S.
Department of State.

Commercial Business Second Quarter 2017 Highlights

Commercial revenue was $108.7 million, 6.1 percent above the $102.4
million in last year’s second quarter. Commercial revenue accounted
for 35 percent of total revenue compared to 34 percent of total
revenue in the 2016 second quarter.

Commercial sales were $159.2 million in the second quarter of 2017, and
ICF was awarded more than 650 commercial projects globally during the
period. The largest awards were:

Energy Markets:

Two task orders with a combined value of up to $29 million with two
utilities in the eastern U.S. to support commercial and industrial
energy efficiency programs.

Three contracts with a combined value of $5.4 million with a renewable
energy producer to provide environmental compliance and cultural
resources monitoring services.

A contract with a value of $5 million with a western U.S. utility to
provide permitting and construction compliance services for a new
substation.

Marketing Services:

Two contracts with a combined value of $36.4 million with a major
hospitality company to implement a Tally® loyalty program
solution and provide ongoing loyalty support.

A contract with a value of $11.3 million with a U.S. health insurance
provider to expand marketing campaign support services.

Two contracts with a combined value of $7.3 million with a western
U.S. utility to provide marketing services support.

A master services agreement with a ceiling of $2.5 million with a
publishing company to provide search engine optimization and content
production services.

Other commercial contract and task order wins which were at least $1.5
million included: continued support for multiple energy efficiency
programs for an eastern U.S. utility; retainer and additional resources
for marketing services for a floor care product manufacturer; digital
services for a major U.S. health insurer; consulting services for a
provider of industrial aviation services; marketing services for a
global beverage company and a global fast food chain; marketing
automation services for a U.S. software company; e-commerce design and
implementation for a global online employment solutions provider;
additional resources to support a digital transformation project for an
international hotel chain; and biological pre-construction surveys,
construction compliance monitoring and reporting for a western U.S.
utility’s substation construction project.

Summary and Outlook

“ICF’s second quarter results illustrate the advantages of providing
advisory work based on deep subject matter expertise and offering
implementation services to a diversified roster of government and
commercial clients. We have entered the second half of 2017 with a
substantial funded backlog, positive momentum in year-to-date sales, the
majority of which represented new contracts, and a near-record business
development pipeline.

“Our year-to-date performance has positioned us for continued growth in
2017 and is consistent with our full-year revenue and earnings
expectations. Based on our current visibility, we re-affirm our guidance
for 2017 revenue ranging from $1.20 billion to $1.24 billion. We
maintain our guidance range for diluted earnings per share at $2.50 to
$2.75, and our Non-GAAP EPS guidance range of $2.84 to $3.09 per diluted
share. Additionally, we continue to expect operating cash flow to be in
the range of $90 million to $100 million,” Mr. Kesavan concluded.

About ICF

ICF (NASDAQ:ICFI) is a global consulting and technology services
provider with more than 5,000 professionals focused on making big things
possible for our clients. We are business analysts, public policy
experts, technologists, researchers, digital strategists, social
scientists and creatives. Since 1969, government and commercial clients
have worked with ICF to overcome their toughest challenges on issues
that matter profoundly to their success. Come engage with us at www.icf.com.

Caution Concerning Forward-looking Statements

Statements that are not historical facts and involve known and
unknown risks and uncertainties are "forward-looking statements" as
defined in the Private Securities Litigation Reform Act of 1995. Such
statements may concern our current expectations about our future
results, plans, operations and prospects and involve certain risks,
including those related to the government contracting industry
generally; our particular business, including our dependence on
contracts with U.S. federal government agencies; and our ability to
acquire and successfully integrate businesses. These and other factors
that could cause our actual results to differ from those indicated in
forward-looking statements are included in the "Risk Factors" section of
our securities filings with the Securities and Exchange Commission. The
forward-looking statements included herein are only made as of the date
hereof, and we specifically disclaim any obligation to update these
statements in the future.

1 Non-GAAP EPS, Service Revenue, EBITDA, and Adjusted EBITDA
are non-GAAP measurements. A reconciliation of all non-GAAP measurements
to the most applicable GAAP number is set forth below. EBITDA margin and
Adjusted EBITDA margin are calculated by dividing these non-GAAP
measures by the corresponding revenue.

ICF International, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(in thousands, except per share amounts)

Three months ended

Six months ended

June 30,

June 30,

2017

2016

2017

2016

(Unaudited)

(Unaudited)

Revenue

$

306,392

$

305,419

$

602,687

$

589,018

Direct Costs

190,896

194,188

374,503

371,387

Operating costs and expenses:

Indirect and selling expenses

86,240

84,641

175,042

166,200

Depreciation and amortization

4,299

4,084

8,818

8,103

Amortization of intangible assets

2,749

3,148

5,483

6,276

Total operating costs and expenses

93,288

91,873

189,343

180,579

Operating Income

22,208

19,358

38,841

37,052

Interest expense

(2,537

)

(2,460

)

(4,488

)

(4,905

)

Other income (expense)

226

(57

)

335

218

Income before income taxes

19,897

16,841

34,688

32,365

Provision for income taxes

7,960

6,258

12,574

11,891

Net income

$

11,937

$

10,583

$

22,114

$

20,474

Earnings per Share:

Basic

$

0.64

$

0.56

$

1.17

$

1.08

Diluted

$

0.63

$

0.55

$

1.15

$

1.06

Weighted-average Shares:

Basic

18,775

19,008

18,840

19,001

Diluted

19,086

19,293

19,252

19,320

Other comprehensive income (loss):

Foreign currency translation adjustments, net of tax

2,100

(2,026

)

2,472

(2,943

)

Comprehensive income, net of tax

$

14,037

$

8,557

$

24,586

$

17,531

ICF International, Inc. and Subsidiaries

Reconciliation of Non-GAAP Financial Measures

(in thousands, except per share amounts)

Three months ended

Six months ended

June 30,

June 30,

2017

2016

2017

2016

(Unaudited)

(Unaudited)

Reconciliation of Service Revenue

Revenue

$

306,392

$

305,419

$

602,687

$

589,018

Subcontractor and Other Direct Costs

(81,446

)

(83,052

)

(157,980

)

(154,221

)

Service Revenue

$

224,946

$

222,367

$

444,707

$

434,797

Reconciliation of EBITDA and Adjusted
EBITDA

Net Income

$

11,937

$

10,583

$

22,114

$

20,474

Other (income) expense

(226

)

57

(335

)

(218

)

Interest expense

2,537

2,460

4,488

4,905

Provision for income taxes

7,960

6,258

12,574

11,891

Depreciation and amortization

7,048

7,232

14,301

14,379

EBITDA

29,256

26,590

53,142

51,431

Special charges related to severance for staff realignment(2)

577

1,086

577

1,086

Special charges related to facility consolidations and office
closures

21

55

1,719

55

Adjusted EBITDA

$

29,854

$

27,731

$

55,438

$

52,572

Reconciliation of Non-GAAP EPS

Diluted EPS

$

0.63

$

0.55

$

1.15

$

1.06

Special charges related to severance for staff realignment

0.03

0.06

0.03

0.06

Special charges related to facility consolidations and office
closures

—

—

0.10

—

Amortization of intangibles

0.14

0.16

0.28

0.32

Income tax effects(3)

(0.07

)

(0.08

)

(0.15

)

(0.14

)

Non-GAAP EPS

$

0.73

$

0.69

$

1.41

$

1.30

(2)

Special charges related to severance were for an unplanned
reduction in workforce of senior management in the second quarter
of 2017, and international staff realignment in the second quarter
of 2016.

(3)

Income tax effects were calculated using an effective U.S. GAAP
tax rate of 40.0% and 37.2% for the second quarter of fiscal year
2017 and 2016, respectively, and an effective tax rate of 36.3%
and 36.7% for the first six months of fiscal year 2017 and 2016,
respectively.